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Letters and Replies

Regarding Richard M. Salsman’s Review of Objective Economics

To the Editor:

I was disappointed by Richard Salsman’s review of Northrup Buechner’s Objective Economics [TOS, Spring 2012]. It was not so much a review as it was a putdown of Dr. Buechner and his knowledge of economics, its history, and accepted laws. (By the way, there is no law of supply and demand as such in economics.) The list of things Dr. Buechner is criticized for doing, or not doing, seemed to go on endlessly.

By the end of Mr. Salsman’s very long review, you knew very little about Objective Economics beyond the fact that it clearly offends Mr. Salsman. About the only thing I agree with Mr. Salsman on is that Objective Economics is about price theory or microeconomics. Price theory is the fundamental base on which all of economics rests. It is always discussed in terms of an economy without government intervention. A government role can then be added. Dr. Buechner makes this quite clear.

The first major contribution in Objective Economics is in recognizing that a market is a place where individuals come to exchange goods and services (i.e., to buy and sell). It is not some mythical force that determines prices. (A market price is usually an average of recent prices or the last price at which an exchange occurred, but it is always the price at which a transaction can occur.)

The second contribution is looking at prices inductively from what goes on in the real world. Coming at prices from this perspective, one finds by far the most frequent method used in determining price is that the seller sets the price based on the relevant facts as he knows them. If a buyer wants to purchase the good or service at that price, an exchange can occur. If there is no buyer, this information must be taken into account by the seller. He can then either change the price or withdraw the product from the market.

There are several other ways in which prices are commonly determined, which Dr. Buechner also discusses: auctions, negotiated prices, brokered prices, and others. He does not discuss the relatively rare case where the buyer sets the price and advertises for sellers. Such cases are mostly limited to purchases of large blocks of stock in a company. However, the principles Dr. Buechner spells out apply also in this case.

Prices are objective because they are determined by the facts that exist: costs, competition, availability of buyers, and many other things. They are not arbitrarily set by the seller at the value he wants to receive (subjectivism) or because what is being sold by its nature has a certain value (intrinsicism). Dr. Buechner properly attributes the concept of objective prices to Ayn Rand because of her distinction of objective value from subjective value and intrinsic value in philosophy.

Objective Economics is not a general theory of economics. It is, however, the base on which a general theory could be built.

Many of Mr. Salsman’s criticisms relate to things Dr. Buechner covers in Appendices to his book. As such they are not considered important enough to his theories to be included in the book itself. While they reflect Dr. Buechner’s views on certain aspects of economics, they are not primary and should not be treated as such in a review.

M. Kathryn Eickhoff-SmithNaples, Florida

Richard Salsman Replies:

I thank Ms. Eickhoff for her letter, but it lacks the cogency requisite to rescind even a word of my review.

She accuses me of launching a “putdown” of Dr. Buechner, but my review contains no ad hominem claims. She also says I “put down” the history of economics and its accepted laws, but, in fact, I specifically defend its history and its valid laws against the book’s cavalier dismissals of each.

Ms. Eikhoff insists that the book’s “major contribution” is the insight that “a market is a place where individuals come to exchange goods and services (i.e., to buy and sell).” This is neither a major contribution nor a profound insight—nor is it proper for Ms. Eickhoff to suggest that my alternative is to attribute pricing to “some mythical force.”

The book’s second major contribution, she says, is “looking at prices inductively.” This is not a novel view, either, nor is the view that “prices are objective because they are determined by facts”; Carl Menger said as much in 1870.

Ms. Eickhoff is vexed that I wrote a “very long review,” but it only matches the frequency and magnitude of the errors in the book.

Ms. Eickhoff reiterates Dr. Buechner’s claim that “there is no law of supply and demand as such in economics” and, while joining him in that error, she nevertheless deploys such concepts as “buyers” and “sellers”—precisely those who demand and supply things in accord with the law of supply and demand (which was concisely defined by Jean-Baptiste Say, as quoted in my review).

Finally, Ms. Eickhoff, perhaps aware of the numerous errors in Dr. Buechner’s Appendices, excuses them as dispensable because they are “not considered important enough to his theories.” But they treat substantive economic doctrines and entail a glossary of terms crucial to his arguments; if these interpretations and concepts are false or confused, as many are, they cannot be foundational to any valid theories, now or later.

About Richard M. Salsman

Richard M. Salsman is president of InterMarket Forecasting, Inc. and a visiting assistant professor of political economy at Duke University. Previously he was an economist at Wainwright Economics, Inc. and a banker at the Bank of New York and Citibank. Dr. Salsman has authored the books Gold and Liberty (1995) and Breaking the Banks: Central Banking Problems and Free Banking Solutions (1990), six chapters in edited volumes, and scores of articles. His work has appeared in the Georgetown Journal of Law and Public Policy, the Wall Street Journal, the New York Times, Forbes, the Economist, the Financial Post, the Intellectual Activist, and The Objective Standard (where he is also a Contributing Editor). From 2010 to 2013 he authored 78 op-eds as a regular essayist at Forbes.com. Dr. Salsman earned a B.A. in economics from Bowdoin College (1981), an M.A. in economics from New York University (1988), and a PhD in political economy from Duke University (2012). His dissertation, “The Political Economy of Public Credit,” explores the theory, history, and consequences of government borrowing.

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